Example of Opportunity Cost

Why would people support a policy that makes them worse off. Why would people on low income oppose a policy to create greater wealth equality within society?

Random National Telephone Sample performed by the Survey Institute, Cornell University

Survey One
The Bush administration has proposed to eliminate the estate tax, the tax people pay when they inherit money.

Do You Favour or Oppose this Move?

• In Favour - 73.8%
• Against - 26.2%

Survey Two
The Bush administration has proposed to eliminate the estate tax, the tax people pay when they inherit money.

The resulting revenue loss will entail higher taxes; implementing further cuts in public spending or increasing the rate at which the government borrows.

All things considered do you favour or oppose the move to repeal estate taxes?

• In Favour - 21%
• Against 78%

Source: The Return of the Economic Naturalist Robert H Frank

An estate tax is one of the most progressive taxes. Only a small % of the population pay it. Inheritance tax only starts above quite a high threshold. Yet, despite many people not benefitting from estate tax, a majority will support its repeal, even though it makes them effectively worse off.

However, when people are made to realise the opportunity cost of repealing the estate tax (higher tax, lower spending), an overwhelming majority oppose it.

There is no such thing as a perfect tax. But inheritance tax doesn't reduce incentives to work.
Inherited wealth is a good example of unearned income. It could even induce laziness as people live off their inheritance.

It just shows that it is not what you ask, but how you ask it that is important.
It also shows that you can get a survey to show you anything you want, as long as you frame questions in the right way.

• Opportunity cost of buying house